1. In some cases, the government can intervene in the market when the equilibrium price is too high or low. For example, a price ceiling is a legal maximum price that can be charged in a particular market. Do some research on your own.
A.Is a price ceiling set above or below the market price?

B.Give an example of a price ceiling and discuss some disadvantages and advantages of this type of government intervention.

2. An art museum raises its admission price, and ends up with a decrease in its total revenue. How could you explain this situation to the museum director?

3. Suppose Billy drinks two cups of coffee a day no matter what the price. What does this mean in terms of supply and demand equilibrium?

4. What are the main determinants of equilibrium of demand and supply? Which is likely to have more of an impact on supply and therefore market equilibrium: the demand for orange juice or the demand for a particular brand of orange juice?

Reading Material:

Demand and Supply – EconMOvies #4: Indiana Jones
Law of Demand, Khan Academy
Law of Supply, Khan Academy
Factors affecting supply, Khan Academy
Market equilibrium, Khan Academy                   

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